Economic Letter

David Bond is a retired bank economist who lives in Kelowna.

A recent BC Supreme Court decision allowed legal proceedings to continue on the question of the extradition of Meng Wanzhou, chief financial officer of the telecom giant Huawei, to the United States on charges of fraud.

This decision will undoubtedly further sour relations between China and Canada. Government policy regarding China will have to change going forward and Canadian commercial interests involving China will have to adjust as well.

Since Meng was arrested, China’s ruling party has taken an increasingly hostile position regarding Canada. The same aggressive attitude is exhibited towards most of China’s trading partners and reflects a desire on China’s part to use whatever tactic is necessary to achieve a dominant position in any dispute.

The Chinese government and media have repeatedly said Meng should be freed without any further delay. This demand reflects the lack of knowledge on the part of Chinese officials of a legal system such as Canada’s.

China is a dictatorship where the rule of law as we understand it is a foreign concept. Legal processes in which an independent judiciary presides over the administration of justice and where government interference in those proceedings is expressly prohibited are unknown in China. So they cannot understand why Meng is not allowed to return to China and regard the Canadian position as a wilful insult to China.

Meng has been afforded the opportunity to live under house arrest in one of two residences she owns in Vancouver. This while the two Canadians seized in retaliation for her arrest, the two Michaels, are held in jail and allowed one visit per month with Canadian diplomatic personnel and/or lawyers.

The aggressive position that China has taken about this matter highlights the risks for Canadian companies inherent in dealings with Chinese counterparts.

Essentially, foreigners have no rights in China. They can be arrested and imprisoned with no specified charges, with limited access to Canadian consular services and no specified time as to when they will be tried for their alleged transgression against the Chinese state.

Moreover, in commercial dealings the level of corruption in China is amongst the highest in the world. This adds to the difficulty of repatriating profits to Canada.

In the past, the Canadian government has attempted to avoid confrontation, motivated in part by the wish to maintain access to the Chinese market for our agricultural commodities and the sheer size of the Chinese market. But of late, China has imposed restraints on the importation of Canadian agricultural commodities.

Canada has limited power to persuade China to change its policies while the Chinese government appears to be increasingly inflexible in handling disputes. The uncertainty of any enduring market success owing to capricious host government activity indicates that Canada should take a firmer position when disputes arise.

It would appear wise to restrain further Chinese direct investment in Canada unless China indicates willingness to adhere to its commitments to the World Trade Organization with respect to tariffs, the treatment of intellectual property and resolution of disputes.

Recent legislation passed by Beijing which effectively negates much of the treaty it signed in 1984 with Great Britain prior to Hong Kong being returned to China also calls for a firm response.

Supposedly, the new legislation will mitigate unrest in the former British colony. But it will also lead to the gradual diminishment of the financial power of the Hong Kong economy.

Beijing wants to promote Shanghai as the international financial powerhouse in Southeast Asia but that is unlikely given the rampant corruption, lack of effective regulation of both stock markets and the financial sector and the Chinese government’s interference in the foreign exchange market.

What to do? Canada should publicly announce a willingness to accept political refugees from Hong Kong. The labour force in the city is highly skilled and would contribute appreciably to the Canadian economy’s recovery from the COVID-19 pandemic.

And perhaps Meng should now be incarcerated in a federal prison until her case is decided and face the same restrictions to access to lawyers and Chinese diplomats as her Canadian counterparts do in China.

David Bond is a retired bank economist who lives in Kelowna.